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Inflation isn't a dirty word to me. It would be really good for me and people like me. I have a mortgage that's taking a huge chunk out of my income and will

by barking 14y ago

Inflation isn't a dirty word to me. It would be really good for me and people like me. I have a mortgage that's taking a huge chunk out of my income and will do for the next 20 years while I'd get about half what I paid if I sold the house now. Inflation would be bad for the people living off their savings, generally the elderly. But then I think they in turn benefitted from an inter-generational wealth transfer in the 70s when there was double digit inflation for most of the decade.

smokeyj 14y ago
I find it disturbing that so much power is in the hands of bankers -- regardless of their benevolent plans for me. Why should any group of men have the authority to inflate or deflate a currency? We're talking about manipulating the common denominator in most transaction -- the value of money. I think the cost of unintended consequences will far outweigh any perceived benefit.
- rayiner 14y ago
  Think about it from first principles. What is money? Money is nothing more than a proxy for goods and services. So, how much money do you need in an economy? Well if money is a proxy for goods and services, it is no good for the supply of money to stay fixed while the amount of goods and services expands. Indeed, the money supply has to not only expand with the present volume of goods and services, but also with peoples' willingness to enter into contracts to trade goods and services over some future time frame (i.e. loans). So the money supply must generally keep growing in a growing economy. How should that be effectuated? For a long time, we tied expansion of the money supply into how quickly we could mine gold and put it into vaults. Given the exponential growth of the economy, and the distinctly non-exponential nature of gold production, it's obvious that wasn't going to work for long. So we have what we have now, with a central bank controlling the money supply. That's the justification for the existing system. Are there alternative mechanisms that don't involve someone with their hands on the big money supply dial? Maybe, but I haven't seen any convincing ones yet.
  - eli_gottlieb 14y ago
    There was a big proposal from the IMF to make what would actually be a major reform: eliminate fractional-reserve banking and nationalize the power of credit-creation. The state would accrue the interest and economic rent derived from the power to loan money into existence.
    - deleted 14y ago
      [deleted]
    - meric 14y ago
      So basically centralize economic power into the state. I can see many ways this won't work out well. Instead of a bunch of Wall Street banks pretending to compete, you just have one monopoly government, not competing.
      - yxhuvud 14y ago
        Indeed. Government works best when it is the scrorekeeper, not when it is both scorekeeper and a player.
        smokeyj 14y ago
        It's great in theory, until the player lobbies the scorekeeper to throw out the other players.
  - digeridoo 14y ago
    Well, if the money supply kept up perfectly with economic growth then the value of money would stay the same. Inflation is extra money supply expansion.
  - white_devil 14y ago
    > it is no good for the supply of money to stay fixed while the amount of goods and services expands. Yeah, you sure wouldn't want the purchasing power of your money to increase, would you now?
- cynicalkane 14y ago
  There are huge consequences to the common denominator in most transactions going up and down, but you don't dodge them by not having a central bank. There are economists out there who hate the idea of having a central bank control everything--they tend to argue for rule-targeting central banks. Examples include the inflation+unemployment target (the Taylor rule) or rules based on the circulating quantity of money (NGDP targeting). So some people think there are ways to have a currency that is simultaneously economically good and manipulation-proof.

by barking 14y ago

smokeyj 14y ago

I find it disturbing that so much power is in the hands of bankers -- regardless of their benevolent plans for me. Why should any group of men have the authority to inflate or deflate a currency? We're talking about manipulating the common denominator in most transaction -- the value of money. I think the cost of unintended consequences will far outweigh any perceived benefit.

rayiner 14y ago
Think about it from first principles. What is money? Money is nothing more than a proxy for goods and services. So, how much money do you need in an economy? Well if money is a proxy for goods and services, it is no good for the supply of money to stay fixed while the amount of goods and services expands. Indeed, the money supply has to not only expand with the present volume of goods and services, but also with peoples' willingness to enter into contracts to trade goods and services over some future time frame (i.e. loans). So the money supply must generally keep growing in a growing economy. How should that be effectuated? For a long time, we tied expansion of the money supply into how quickly we could mine gold and put it into vaults. Given the exponential growth of the economy, and the distinctly non-exponential nature of gold production, it's obvious that wasn't going to work for long. So we have what we have now, with a central bank controlling the money supply. That's the justification for the existing system. Are there alternative mechanisms that don't involve someone with their hands on the big money supply dial? Maybe, but I haven't seen any convincing ones yet.
- eli_gottlieb 14y ago
  There was a big proposal from the IMF to make what would actually be a major reform: eliminate fractional-reserve banking and nationalize the power of credit-creation. The state would accrue the interest and economic rent derived from the power to loan money into existence.
  - deleted 14y ago
    [deleted]
  - meric 14y ago
    So basically centralize economic power into the state. I can see many ways this won't work out well. Instead of a bunch of Wall Street banks pretending to compete, you just have one monopoly government, not competing.
    - yxhuvud 14y ago
      Indeed. Government works best when it is the scrorekeeper, not when it is both scorekeeper and a player.
      - smokeyj 14y ago
        It's great in theory, until the player lobbies the scorekeeper to throw out the other players.
- digeridoo 14y ago
  Well, if the money supply kept up perfectly with economic growth then the value of money would stay the same. Inflation is extra money supply expansion.
- white_devil 14y ago
  > it is no good for the supply of money to stay fixed while the amount of goods and services expands. Yeah, you sure wouldn't want the purchasing power of your money to increase, would you now?
cynicalkane 14y ago
There are huge consequences to the common denominator in most transactions going up and down, but you don't dodge them by not having a central bank. There are economists out there who hate the idea of having a central bank control everything--they tend to argue for rule-targeting central banks. Examples include the inflation+unemployment target (the Taylor rule) or rules based on the circulating quantity of money (NGDP targeting). So some people think there are ways to have a currency that is simultaneously economically good and manipulation-proof.